Securities watchdog charge Kanebo with accounting fraud

Date

Class

8th Sep 2005

Fraud Investigation

Details

The Securities and Exchange Surveillance Commission filed a criminal accusation of accounting fraud Wednesday against Kanebo Ltd. and three former executives of the textile and cosmetics company now undergoing rehabilitation.

The three executives -- former President Takashi Hoashi, 69, former Vice President Takashi Miyahara, 63, and former Managing Director Kenzaburo Shimada, 59 -- were arrested July 29 for allegedly submitted falsified financial statements to financial authorities.

The Tokyo District Public Prosecutor's Office has been jointly investigating the Kanebo case with the SESC. Investigators allege the company made false claims amounting to more than 80 billion yen on its assets, 8 billion yen more than the figure estimated when the three were arrested.

Hoashi and his subordinates are suspected of doctoring official financial statements to show the Tokyo firm was in the black when it really had a capital deficit of 81.9 billion yen in fiscal 2001 and a deficit of 80.6 billion yen in fiscal 2002.

It has also been disclosed that the three established an off-the-book fund of around 250 million yen, but it remains unknown what the fund was intended or used for.

Separately, Kanebo announced it has filed a criminal accusation against the three former top executives for alleged falsification of financial statements. In the complaint, Kanebo admitted that the firm itself is guilty of the same charges.

"It is very sad and painful to file a charge against our company veterans, but we cannot avoid clarifying responsibilities for the past as we work for the revival," Kanebo Chairman Akiyoshi Nakajima told a news conference Wednesday.